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US Treasury yields tick up as core PCE cools and October hike odds fade
Investors reduced the probability of an October Fed rate hike after core PCE rose 3.0% year-on-year in August, down from the prior month’s 3.0% read.
Longer-dated US Treasury yields rose slightly on Wednesday afternoon, while 2-year yields were close to flat as investors digested August inflation data and scaled back expectations for a Fed rate hike in October, according to Reuters as cited by LiveMint Markets.
The Commerce Department’s Bureau of Economic Analysis said the Personal Consumption Expenditures Price Index rose 0.3% last month, after a downwardly revised 0.1% increase in July, while Core PCE increased 3.0% year-on-year in August.
Bets for an October move eased after the data, with the market last pricing about a 63% chance the Fed will keep rates steady next month, up from 55% before the PCE release, based on LSEG data.
Reuters also noted that September yields have advanced at their fastest monthly pace in years, as the Middle East war has kept oil prices elevated and raised questions about how quickly inflation will cool.